The main drivers for this outstanding performance were a $418 million reduction in annualized labor costs and significant revenue increases, which resulted in part from the company's continued success in international expansion. The airline reported a 26% year-over-year increase in trans-Atlantic revenue, as well as a 21% increase in Pacific revenue.
Continental's share price is now up by more than 30% since I first suggested back in April that it might be a value play. The stock still seems quite cheap to me, since additional profit drivers such as increased first-class seats are raising the company's intrinsic value.
The airline industry's fortunes are also improving. Delta's
While the profit margin on the extra $300 million may be disappointing, the increased revenue will certainly help offset rising fuel costs now that oil is approximately $60 a barrel. Alas, since only 6% of passengers buy walk-up or three-day-advance-notice fares, this increase may have only a minor positive impact in the long term.
Continental also reported that it plans on doubling the amount of first-class seats available for sale as a result of increased demand and the addition of 13 new Boeing jets, which will be added to the existing fleet in the second half of 2005. These are just a couple of the positive moves by a company that is already executing extremely well in a very tough market.
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